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As the business issues
are becoming complex and challenging, it is imperative to
look into the global risk management practices. These practices
are evolving to match the rigor and the demands of global
business formats. Many companies have started appointing a
Chief Risk Officer (CRO) to enhance and improvise their risk
management capabilities. The Deloitte & Touche LLP's Global
Risk Management Survey: Accelerating the Risk Management
Practices was undertaken to study the critical risk
management issues faced by 130 global financial institutions.
This survey report indicated that involvement of the top management
in risk aspects are on the rise; 84% of the sample companies
have a CRO to manage risks, and Effective Risk Management
(ERM) implementation has been inforce in many companies across
the globe.
ERM
has become a challenge due to factors like regulatory compliances,
increasing Mergers and Acquisitions (M&As), alternative
investment opportunities, increased usage of credit derivatives
and volatile energy markets. The expansion of emerging markets,
geopolitical concerns and natural disasters and epidemics
have also broadened the need for risk administration. So a
holistic, Enterprise-wide Risk Management system has to be
integrated into the strategic moves of the organization.
The
Plunkett research studies indicate that the recent regulatory
changes have heightened the competition within the insurance
industry worldwide. They report that many M&As are on
the anvil, and all the financial services and products to
their customers, from checking accounts to investment products
to life insurance, may be offered under a single umbrella.
Many investment companies like Merrill Lynch are planning
to enter into the insurance space, and banking companies are
aggressively selling bancassurance. Competition is all set
to peak with the involvement of insurance companies globally.
This
issue brings forth various view points of extensive research
on Risk and Insurance. The first paper, "Flexible Insurance
for Separate Accounts", by Ludwig Chincarini, discusses
about portfolio protection and online brokers' offering of
separate accounts with the benchmark costs for portfolio diversion.
The second paper, "Risk Management Practices Among the
Gems and Jewelry Dealers in Bangalore", by Padma Srinivasan
and R Subramanian highlights the deeper insights into the
pragmatic ways of Risk Management of general and specific
risks identified with the industry.
The
third paper, "Analyzing the Medical Costs for Motor Vehicle
Accident: Experience of Hospital Universiti Kebangsaan Malaysia",
by Noriza Majid, Saiful Hafizah Jaaman, Noriszura Ismail,
and Nor'Aisah Mahmud, focuses on the medical costs of motor
vehicle accident incurred by patients who receive treatment
at the Hospital Universiti Kebangsaan Malaysia (HUKM), which
is estimated using a multiple regression analysis. The contributing
factors such as age, gender, type of treatments and patient's
status (in-patient or out-patient) are analyzed and studied
in order to determine their effects on the charges HUKM imposed.
The last paper, "Long Persistence Volatility in the Financial
Corporate Bond Spreads", by Mehmet Turk and Alper Ozun,
argues that since high-rated financial corporate bond spreads
are used for option valuation, permanent volatility might
cause high risk premium and nonlinearities in pricing.
Apart
from the research papers, this issue also contains a review
of the book, Risk Management & Derivatives, which
offers the readers the latest risk perspectives of derivatives.
- Padma Srinivasan
Consulting
Editor
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